No Sustained Increase in Hires Rate in Two Years

The Job Openings and Labor Turnover Survey (JOLTS) data released this morning by the Bureau of Labor Statistics showed that the hires rate—the share of total employment accounted for by new hires—held steady at 3.3 percent in February. The hires rate is one of the best comprehensive measures of the strength of job opportunities because it incorporates two components: 1) net new hires, and 2) new hires that are replacing people who quit their jobs (discussed below). Figure A shows the hires rate each month over time. It fell dramatically in the Great Recession, improved very modestly between the middle of 2009 and early 2012, but has made no sustained improvement since February 2012, two years ago.

Note: Shaded areas denote recessions. The hires rate is the number of hires during the entire month as a percent of total employment. The layoff rate is the number of layoffs and discharges during the entire month as a percent of total employment. The quits rate is the number of quits during the entire month as a percent of total employment.

Low voluntary quits

Today’s JOLTS report shows that many employed workers remain locked in their jobs, unable or unwilling to quit the job they have because other job opportunities remain so scarce. In 2006, nearly 3 million workers voluntarily quit their jobs each month. That dropped to a low of 1.6 million in August 2009. It has since been generally increasing, but it is still extremely low relative to before the Great Recession, and progress is bumpy and slow. In February, the number of voluntary quits held steady (increased by 14,000) at 2.4 million, 20 percent below its prerecession level. Furthermore, the level of quits has made no sustained improvement in five months. It’s worth noting that the low level of voluntary quits in the aftermath of the Great Recession—which means fewer people experiencing a short bout of unemployment between jobs—is likely one of the reasons the short-term unemployment rate has seen greater improvement in recent years than the long-term unemployment rate.

Job openings

Job openings showed more strength in February, increasing by 299,000. This brought the total number of job openings to 4.2 million. In February, there were 10.5 million job seekers (unemployment data are from the Current Population Survey), meaning that there were 2.5 times as many job seekers as job openings. Put another way: Job seekers so outnumbered job openings that 60 percent of job seekers were not going to find a job in February no matter what they did. In a labor market with strong job opportunities, there would be roughly as many job openings as job seekers.

Furthermore, the 10.2 million unemployed workers understates how many job openings will be needed when a robust jobs recovery finally begins, due to the existence of 5.3 million would-be workers who are currently not in the labor market, but who would be if job opportunities were strong. Many of these “missing workers” will become job seekers when we enter a robust jobs recovery, so job openings will be needed for them, too.

Today’s labor market weakness is not due to workers lacking the right skills

Figure B shows the number of unemployed workers and the number of job openings by industry. This figure is extremely useful for diagnosing what’s behind our sustained high unemployment. If our current elevated unemployment were due to skills shortages or mismatches, we would expect to find some sectors where there are more unemployed workers than job openings, and some where there are more job openings than unemployed workers. What we find, however, is that unemployed workers dramatically outnumber job openings across the board. There are between 1.3 and 7.7 times as many unemployed workers as job openings in every industry. In other words, even in the industry with the most favorable ratio of unemployed workers to job openings (health care and social assistance), there are still nearly 30 percent more unemployed workers than job openings. In no industry does the number of job openings even come close to the number of people looking for work. This demonstrates that the main problem in the labor market is a broad-based lack of demand for workers—not, as is often claimed, available workers lacking the skills needed for the sectors with job openings. For more on this, see this post.